Kyle Lohse being worth $15 million dollars a season seems absurd. But MLB teams have just received an influx of cash, which may raise the price of player contracts
Buster Olney sent out an interesting tweet about starting pitcher Kyle Lohse before Thursday's World Series game. After John Mozeliak stated that the Cardinals do not plan to re-sign Lohse or Lance Berkman, Onley reported:
Some execs, agents speculating Lohse will get C.J. Wilson type deal, in $75 m. range.— Buster Olney (@Buster_ESPN) October 25, 2012
For the sake of the article, I'm going to assume Olney is not simply acting as a promotional mouthpiece for Scott Boras, and that there are industry insiders who actually do expect Lohse to get this deal. A 75 million dollar contract would likely be a five-year deal, averaging out at 15 million per year. Spending that much money on an aging, injury-prone pitcher who's career best fWAR is 3.6 doesn't sound like a solid investment.
Part of the reason I think no team should sign Lohse to a $15 million per year deal is my understanding of how much wins are worth on the open market. For the past few off-seasons, sabermagicians have estimated that major league teams value wins to be roughly worth $5 million per win. That means Lohse would need to accumulate 15 WAR over the life of his contract to be worth his deal.
15 WAR in five seasons seems like a lot to ask of a pitcher who has only accumulated 24.7 WAR in his 12 year career. Even if we assume that the past two seasons are now closer to his true talent level than his earlier seasons, he battled injuries in 2009 and 2010 that could potentially reappear. Lohse is also 34 years old, which only increases the risk he will not be worth the money Olney speculates some team will pay him.
I believe there is little chance that Lohse is worth 15 WAR over the next five seasons, and I imagine that most MLB teams would agree with that assessment. So why would a team be willing to sign the pitcher to a $75 million deal?
The more I thought about why a team would sign Lohse to a $75 million deal, the more I came to believe that my analysis was flawed. I was evaluating Lohse's contract at $5 million year, while major league teams might be evaluating him at $7 or $8 dollars a win. That would mean Loshe only needs to be worth 2 WAR a season instead of 3 WAR, which is a much safer bet.
There has been some smoke that suggests player contracts are going to escalate this winter. Starting in 2014, teams will be earning $12 million more per season thanks to a new ESPN contract. FOX and Turner Sports doubled their TV contracts as well, so each MLB team is going to gain around $25 million more per season thanks to these national tv deals alone.
Many MLB teams are also increasing their revenues thanks to increasingly lucrative Regional Sports Network contracts. Although there are valid concerns that these contracts are ballooning to unsustainable rates, teams seem to be banking on the local TV deals as well as the national TV deals to provide more income. Combine this higher income with lower amateur costs, and all teams might have some serious money to burn this off-season.
David Glass has talked about raising the Royals payroll next season, and rightfully so. If most other teams in baseball are thinking the same thing, it might not help the Royals acquire talent. Lohse has stated that he wants to pitch for a winning team next season, but money has a unique way of convincing people to do things they claim they don't want to do. For the Royals to sign any of their top pitching targets, they likely will need to be the highest bidder, since they will be receiving no "winning" discounts. This becomes more difficult if other teams, already wealthier than the Royals, have money to spend as well.
It's going to be an interesting off-season if teams start signing players to bigger contracts to reflect the increase in revenue. Contracts that seem over-priced may actually be closer to the new market value. The Royals may have to increase payroll just to keep up with other teams, making them no closer to catching up with the rest of the league.